Personal income for the nation grew 1.5 percent in the second quarter of 2004, the fastest pace in more than three years, according to new estimates released today by the U.S. Bureau of Economic Analysis. The Rocky Mountain and Far West regions grew faster than any other of the eight BEA regions, growing 1.8 percent and 1.7 percent respectively. The New England and the Great Lakes regions registered the weakest growth, at 0.9 percent and 1.2 percent respectively. These two regions have generally lagged the nation during the last four years.

Chart 1

Personal income growth by component

While earnings grew at the same 1.5 percent rate as personal income, growth of the proprietors' income component of earnings was markedly stronger than that of the wage and salary component. Proprietors' income growth rates (excluding the farm sector) were brisk in every state: Michigan had the fastest growth (4.7 percent) and Rhode Island had the slowest (2.3 percent). Wage and salary disbursements grew 1.2 percent, continuing a trend since 2000:1 of slightly lower growth than total personal income. Only in Oregon and Washington did wages and salaries outpace personal income growth in the second quarter.

Dividends, interest, and rent was a weak contributor to growth, with all states but Wyoming growing no more than 1.4 percent. The growth was primarily in dividends, which increased 2.4 percent. Interest grew only 0.5 percent while rents fell 0.2 percent.

In most states, transfer receipts was one of the fastest growing components of personal income. This reflects fast growth in Medicare and Medicaid payments, moderated by a decline in state unemployment insurance (UI) benefits. Nationally, UI benefits fell 19 percent in the second quarter after falling 20 percent in the first quarter. This is a result of the fall in the number of unemployment insurance claims under the regular state program and an even larger decline in the number of persons claiming extended benefits and Temporary Extended Unemployment Compensation. Extended benefits are currently not available in any state.

Earnings growth by industry

Real estate and leasing grew the fastest of the industry sectors, contributing more than 13 percent of the gain in earnings by place of work. Earnings in the arts, entertainment, and recreation industry, on the other hand, showed the largest decline: 1.9 percent. Almost half of the decline was concentrated in the Great Lakes region. Higher gasoline prices contributed to a decline in tourist travel to amusement parks and limited spending on fuel-intensive activities such as boating.

Strong income growth in the farm sector had a particularly noticeable effect on total personal income in two states. In Arkansas nonfarm personal income grew 1.4 percent while total personal income (including the farm sector) grew 1.8 percent; in North Dakota nonfarm personal income grew 1.0 percent while total personal income grew 1.4 percent.

Real earnings growth

In every region, earnings by place of work, adjusted for inflation with the national implicit price deflator for personal consumption expenditures, has now climbed above the level set in first quarter 2001, the previous peak in the national business cycle. Among states only Massachusetts and New York have not returned to their first quarter 2001 levels. The figure below illustrates the range in regional earnings growth since first quarter 2001. The upper bound of the shaded area is the real earnings growth in the Southeast region and the lower bound is the real earnings growth in New England. Growth rates for the other regions fall in between.

Chart 2

The estimates released today reflect annual and quarterly revisions in state personal income beginning with the first quarter of 2001. Revisions are usually made each September to incorporate source data that are more complete, more detailed, and otherwise more consistent than previously available. The October 2004 Survey of Current Business will contain detailed state personal income tables and an article describing the revisions. The quarterly and annual revised estimates are available from BEA's Web site at www.bea.gov.

Definitions

Personal income is the income received by all persons from all sources.
Personal income is the sum of net earnings by place of residence, rental income of persons, personal
dividend income, personal interest income, and personal current transfer receipts.
Net earnings is earnings by place of work (the sum of wage and salary disbursements
(payrolls), supplements to wages and salaries, and proprietors' income) less government contributions
for social insurance, plus an adjustment to convert earnings by place of work to a place-of-residence
basis. Personal income is measured before the deduction of personal income taxes and other personal taxes
and is reported in current dollars (no adjustment is made for price changes).

The estimate of personal income in the United States is derived as the sum of the state
estimates; it differs from the estimate of personal income in the national income and product
accounts (NIPA's) because of differences in coverage, in the methodologies used to prepare the
estimates, and in the timing of the availability of source data.

BEA groups all 50 states and the District of Columbia into eight distinct regions for
purposes of data collecting and analyses: New England (Connecticut, Maine, Massachusetts, New
Hampshire, Rhode Island, and Vermont); Mideast (Delaware, District of Columbia, Maryland,
New Jersey, New York, and Pennsylvania); Great Lakes (Illinois, Indiana, Michigan, Ohio, and
Wisconsin); Plains (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South
Dakota); Southeast (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North
Carolina, South Carolina, Tennessee, Virginia, and West Virginia; Southwest (Arizona, New
Mexico, Oklahoma, and Texas); Rocky Mountain (Colorado, Idaho, Montana, Utah, and
Wyoming); and Far West (Alaska, California, Hawaii, Nevada, Oregon, and Washington).

BEA's major national, regional, international, and industry estimates; the Survey of Current
Business; and BEA news releases are available without charge on BEA's Web site:

Most of BEA's estimates and analyses are published in the Survey of Current Business, BEA's
monthly journal. Subscriptions and single copies of the printed Survey are for sale by the
Superintendent of Documents, U.S. Government Printing Office. Internet: <bookstore.gpo.gov>;
phone: 202-512-1800; fax: 202-512-2250; mail: SSOP, Washington, DC 20402-0001.

Next state personal income release - December 21, 2004, at 8:30 AM EST for state personal income, third quarter 2004.